Peer to peer lending is here to stay but banks will react to threat

The head of the British Business Bank has stated that P2P lending is beginning to have an effect on the SME finance market, yet cautioned that banks would ascend to the competition.

Keith Morgan, CEO of the state-backed institution, said: “positive net lending [to SMEs] is now coming from the banking system”.

But Morgan further stated that the SME market is now understanding the advantages of extra choice like alternative fund providers.

According to him: “The centrepiece of the P2P offering is the level of information, convenience and speed, which add up to a compelling customer experience.”

Banks are responding to the competition posed by peer-to-peer lenders. Because of this, high-street banks are building up their innovative procedures.

“I think P2P is here to stay but I’d certainly expect the banks to react, as any business would react commercially,” Morgan added.

The British Business Bank was set up by previous Business Secretary Vince Cable to lift financing to SMEs. It has directed funds to various peer-to-peer platforms including Funding Circle and MarketInvoice. In January, it pledged a further £40m for loaning through Funding Circle, bringing the aggregate lent by the UK government through the platform to £100m.

Morgan additionally said that SMEs’ strategies have not been affected by Brexit and that it is too soon to comprehend the effect of the UK’s exit from the EU on the BBB.

“I don’t think negotiations are advanced enough to understand the form Brexit would take and what role we would be asked to play, but the BBB stands ready to play a role.”

P2P lending is here to stay and the momentum for this year and beyond is making a difference and changing the experts view point  as a real alternative finance option that the main banks and finance institutions can no longer bury their heads in the sand!